Institutional quality, insurance markets, and economic growth: evidence from pooled mean group estimation

ABSTRACT

We study the role of institutional quality and insurance markets in the economic growth of middle-income countries between 2005 and 2019. Insurance market development consistently explains long- and short-run growth. Institutional quality is a better predictor of long-run growth, but is more erratic regarding sign and significance for short-run growth.

KEYWORDS:

• Insurance markets
• institutional quality
• economic growth
• PMG

JEL CLASSIFICATION:

• O16
• E44
• O43

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ As rendered by the World Bank’s Country Policy and Institutional Assessment. We conducted principal component analysis (PCA) to procure a composite index of institutional quality (CIQ) (details available from authors).

² Non-life insurance density (NID), life insurance density (LID), total insurance density (TID), non-life insurance penetration (NIP), life insurance penetration (LIP), and total insurance penetration (TIP).

³ Percentage change of gross domestic product per capita.

⁴ This selection of variables follows Pradhan et al. (2017).

⁵ The results of these three tests (cross-sectional dependency, unit root and co-integration) are not reported to conserve space.

⁶ We fix lag length 1 for all variables on the basis of Akaike Information Criterion (AIC).